India corporate tax rate, filing deadline, tax incentives, and exemptions explained

Why expand to India?

India is the country with a population of 1.4 billion, the world's largest. It's also the world's largest and youngest consumer market, which is set to grow by 46% by 2030 due to rising incomes and rapid urbanisation. This market is hungry for new, advanced, and premium goods and services, something that isn't lost on global businesses.

While its population might be its biggest asset, India also courts foreign investors with its highly skilled workforce, affordable labour, manufacturing, and real estate, booming services sector, and R&D talent. This makes it a key player in the Asian diversification plans of major economies like the US and Europe, which want to lower their dependence on any single country.

While India's corporate tax regime is multi-layered and often demands high compliance, its 'Make in India' policy and continued efforts to reduce red tape and encourage ease of doing business make it a top draw for global businesses.

India corporate tax

India's corporate tax is a direct levy on the business profits of domestic and foreign companies. But while Indian companies are taxed on their worldwide income, non-resident companies pay tax on income earned in India. The two entities are also subject to vastly different tax rates.

Understanding corporate tax in India starts with knowing that the country operates two tax regimes, which can significantly alter a company's tax liability. The new system, introduced in 2019, is designed solely for domestic companies, though, and offers concessional corporate tax rates and simplified tax structures.

In addition to corporate tax, business entities in India are subject to a surcharge and a health and education cess, leading to a higher effective corporate tax.

Furthermore, certain companies with large 'book profits' but low taxable income that pay taxes under the old regime might be subject to a 15% Minimum Alternative Tax (MAT) instead if their corporate tax liability is lower. Companies under the new regime are exempt from MAT.

In India, the Income Tax Department is tasked with tax administration under the provisions of the Income Tax Act.

Tax rates and structures

Corporate income tax rates for resident companies under the old regime:

• 25% for domestic companies with annual turnover not exceeding INR 400 crore
  
• 30% for all other domestic companies
  
• Plus surcharge at the rate of 7% (assessable income between INR 1 crore and INR 10 crore) or 12% (assessable income above INR 10 crore)
  
• Plus 4% health and education cess.
  

This takes the effective corporate tax rate for domestic companies to 26%, 27.82%, and 29.12%.

Corporate income tax rates for non-resident companies under the old regime:

• 35% for foreign companies with a permanent establishment in India
  
• 50% for foreign companies earning royalties or receiving technical services fees under specific agreements with the Indian government.
  
• Plus surcharge at 2% (assessable income between INR 1 crore and INR 10 crore) or 5% (assessable income above INR 10 crore)
  
• Plus 4% health and education cess.
  

This takes the effective rate for overseas companies to 36.40%, 37.13%, or 38.22%.

Corporate tax rates for domestic corporations under the new regime:

• 15% for new manufacturing companies
  
• 22% for existing domestic companies
  
• Plus 10% surcharge
  
• Plus 4% health and education cess.
  

Under this system, a new manufacturing company is liable to pay corporate tax at an effective rate of approximately 17.16% while existing domestic companies are subject to an effective rate of 25.17%.

What is taxable income in India?

Taxable income includes income from various sources, such as business profits, capital gains, renting of property, dividends, interest, etc.

To determine taxable income, take net profit and deduct allowable expenses – such as business-related expenses, start-up expenses (staggered over five years), interest on business loans, contributions to approved charities, taxes (excluding income tax), depreciation, and payments to foreign affiliates.

After adjusting for allowable deductions, add back any expenses that are not deductible, such as fines and penalties, personal expenses, etc. The resultant figure is your assessable income, to which you apply the correct tax rate.

Historical corporate tax rates and recent reforms

India introduced major reforms in 2019 when it introduced concessional corporate income tax rates of 22% and 15%, marking a new chapter in its journey to becoming a competitive tax jurisdiction. This was a major departure from 2001, when corporate tax peaked at 38.95%.

Then in February 2026, India's central government passed its Budget for 2026-27, announcing more reforms. The first being a new Income Tax Act, which replaces its 60-year-old predecessor and takes effect in April. Simplified Income Tax Rules and Forms are also set to be notified soon.

Among measures to attract global business and investment, India has proposed a tax holiday till 2047 for foreign companies providing cloud services to global customers using data centre services in India and a five-year income tax exemption for non-resident companies supplying capital goods, equipment, and tooling to toll manufacturers in bonded areas engaged in the manufacture of electronic goods.

Other proposed tax reforms include reducing the MAT rate to 14% from the current 15%, taxing buyback of shares as capital gains instead of dividend income, and rationalising penalty and prosecution proceedings.³

Tax incentives and exemptions

Foreign investors can expect the following incentives in India:

• Relief for start-ups: Eligible start-ups receive 100% deduction of profits and gains from innovation development, improvement of products and services, or a business model with employment generation or wealth creation potential. This relief is available for three consecutive years after incorporation.
  
• Sector-specific tax incentives: India offers various deductions and tax exemptions for businesses engaged in specific activities such as exports, affordable housing development, infrastructure development, processing, packaging and preservation of fruits and vegetables, handling, storage, and transportation of food grains, etc.
  
• International Financial Services Centre (IFSC) incentives: Total tax exemption for 10 years, a reduced Minimum Alternative Tax rate of 9%, and waiver of withholding taxes on certain payments are available for businesses operating in the International Financial Services Centre – a specialised jurisdiction that facilitates cross-border financial services through competitive tax structures and ease of doing business.
  
• Patent Box: This incentive provides advantageous tax rates on income from patents.
  
• Foreign tax credit: Resident companies can avail a tax credit on taxes paid on foreign-sourced income against their Indian corporate tax liability.
  

When to file corporate tax returns in India

In India, the financial year runs from April 1 to March 31.

An annual tax return must be filed by October 31 after the end of the assessment year. If transfer pricing applies, the filing deadline can be extended to November 30.

Corporate taxpayers are allowed to revise their tax returns and file updated returns within 48 months from the end of the assessment year.

Non-resident companies are exempt from filing tax returns in India if their total income comes from dividends, interest, royalties, or technical services fees, for which taxes have already been deducted.

Indian companies and foreign corporations are required to pay advance tax in quarterly instalments – by June 15, September 15, December 15, and March 15.

Taxes must be paid in INR via the tax authority's online portal or authorised banks.

Reducing tax burden with double taxation agreements

India has 94 comprehensive double taxation agreements and eight limited tax treaties. These treaties primarily seek to safeguard businesses from being taxed in two jurisdictions on the same income. Foreign companies that are tax residents of a country India has a DTA with are eligible for more advantageous tax rates and provisions.

The India-Singapore double taxation agreement was signed in 1994 and amended in 2017. It offers:

• Reduced withholding tax rates on dividends – 10% if at least 25% of the shares of the paying company is held by the recipient company, 15% otherwise.
  
• Reduced withholding tax rates on interest – 10% on loans granted by a bank or similar institute, 15% otherwise.
  
• Reduced withholding tax rates of 10% on royalties and technical services fees.
  

Tax treatment of dividends in India

In India, withholding tax is commonly referred to as Tax Deducted at Source (TDS). It applies to income from various sources, including dividends, interest, royalties, technical services, professional services, rent, contractual payments, purchase of immovable property, and so on. Tax rates vary by income type. The withholding tax rate for dividends, interest, and royalties is 20%, although companies can unlock preferential rates under double taxation agreements.

Also, there are payment thresholds for each income type and companies are required to withhold tax only if the total payment amount to a single person in a tax year crosses that threshold.

Other taxes in India

Apart from corporate tax and withholding tax, businesses in India are subject to a variety of direct taxes and indirect taxes, including:

Goods and services tax (GST)

The goods and services tax (GST) is an indirect levy on the supply of goods and services. It was launched in 2017 to replace a variety of indirect taxes such as value added tax (VAT), excise duty, and service tax. However, GST doesn't apply to products such as crude oil, petrol, diesel, aviation fuel, natural gas, and alcohol, which remain under the value added tax regime.

The GST has three components – CGST levied by the central government, SGST levied at the state level, and Integrated GST (IGST), which is the sum of CGST and SGST.

Capital gains tax

Profits earned from the sale of capital assets such as property, equipment, stocks, mutual funds, and patents attract a capital gains tax. Capital gains are categorised either as short-term capital gains or long-term capital gains depending on holding period (12 months for listed securities, 24 months for other assets). Long-term capital gains are taxed at the rate of 12.5% for gains above the INR 1.25 lakh threshold while short-term capital gains are taxed at 20%.

Customs duty

Most imports into India are subject to customs duty, which comprises a basic customs duty along with a social welfare surcharge, health cess, compensation cess, and IGST.

Property tax

This is imposed by the municipal corporations with tax rates varying from city to city.

Stamp duty

All legal property transactions are subject to stamp duty, usually paid by the buyer. However, both the buyer and seller share the tax burden in property exchange cases. Duty rates vary from state to state.

Securities transaction tax

The securities transaction tax (STT) applies to transactions involving the sale or purchase of equity shares, derivatives, and equity-oriented mutual funds through a recognised stock exchange. Each instrument carries a different tax rate, with rates generally ranging from 0.001% to 0.125%.

Tax compliance and registration

Fulfilling tax obligations in India starts with registering with the Income Tax Department for corporate tax.

• Registration requirements: Companies are required to obtain a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the department so that they can file income tax returns and pay taxes.
  
• Applicable tax rates: With two corporate tax regimes, India has more than one corporate tax rate. For foreign corporations, it is especially critical to know which tax rate is applicable. Corporate tax in India also comprises a surcharge and cess and having knowledge of the applicable surcharge rates is equally important.
  
• Tax deadlines: Luckily, there is just one tax filing deadline in India, which falls on October 31. However, corporate tax is paid in advance in quarterly instalments, which taxpayers must make note of.
  
• Fees and penalties: Companies that delay their tax returns or fail to pay corporate tax may face fines, penalties, and interest charges. If the tax payable is not paid in full before the tax filing deadline, the tax return will be treated as defective.
  

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FAQs

What is the corporate tax rate in India?

The corporate tax rate in India is 25% and 30% for domestic companies and 35% for foreign companies under the old tax regime. However, domestic companies are eligible for a reduced rate of 22% and new manufacturing companies of 15% under the new regime.

Who pays corporate tax in India?

Both resident companies and non-resident companies with a permanent establishment in India are liable to pay corporate income tax. The former are taxed on worldwide income and the latter on income that is received or accrues or arises in India.

Is corporate tax 30%?

The 30% corporate tax refers to the base rate for domestic companies with annual turnover in excess of INR 400 crore.

How many types of corporate tax are there in India?

Corporate tax in India is classified into corporate tax for domestic companies and corporate tax for foreign businesses. Corporate tax also comprises a surcharge and a health and education cess. Additionally, companies with low taxable income might be subject to a Minimum Alternative Tax instead of the usual corporate tax.

How has India’s corporate tax rate changed?

India introduced major tax reforms in 2019, slashing rates to 15% (for newly established manufacturing companies) and 22% (all other domestic companies) under a new tax regime. The MAT rate was also lowered to 15% from 18.5%